DCF Studio

    IT · NYQ · Technology

    Gartner, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 226.65

    Market price

    USD 185.78

    Implied upside

    +22.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 226.65+22.0%
    Exit multiple
    USD 211.84+14.0%
    Market price
    USD 185.78

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.9bnUSD 7.3bnUSD 7.7bnUSD 8.2bnUSD 8.6bn+5.9%
    EBITUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bn+5.9%
    NOPATUSD 1.0bnUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.3bn+5.9%
    Add depreciation & amortisationUSD 224.4mUSD 237.6mUSD 251.5mUSD 266.3mUSD 281.9m+5.9%
    Less capital expenditureUSD -122.3mUSD -129.5mUSD -137.1mUSD -145.2mUSD -153.7m+5.9%
    Less increase in working capitalUSD -30.9mUSD -32.7mUSD -34.7mUSD -36.7mUSD -38.8m+5.9%
    Free cashflow to firmUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.4bn+5.9%
    Discount factor0.95820.87980.80790.74180.6811-
    Present valueUSD 1.1bnUSD 1.0bnUSD 994.7mUSD 966.9mUSD 939.9m-2.8%
    Present Value Of The ForecastUSD 5.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.969Reported 0.953, pulled toward 1.0 (Blume)
    Cost of equity10.32%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 11.7bn77.8% of capital
    Total debtUSD 3.3bn22.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.91%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 226.65

    73% of EV

    Forecast FCFF, final year
    USD 1.4bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (8.9% of NOPAT)
    USD -123.8m
    Capitalised
    USD 1.3bn
    ROIC (reported)
    28.0%
    Terminal value, undiscounted
    USD 20.2bn
    Terminal value, discounted
    USD 13.8bn
    Enterprise value
    USD 18.8bn
    Less net debt
    USD 1.6bn
    Equity value
    USD 17.1bn

    Exit at 9.7x EBITDA

    Value per shareUSD 211.84

    72% of EV

    Terminal value, undiscounted
    USD 18.6bn
    Terminal value, discounted
    USD 12.7bn
    Enterprise value
    USD 17.6bn
    Less net debt
    USD 1.6bn
    Equity value
    USD 16.0bn

    Spread between methods: 7%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.91%289.03309.91335.47367.51408.88
    7.91%241.39254.97271.01290.28313.86
    8.91%206.61215.92226.65239.15253.92
    9.91%180.11186.74194.24202.79212.64
    10.91%159.23164.10169.52175.60182.47

    Outlined: this model. Green text: above today's price of 185.78. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year5.9%1.5%-4.4pp
    EBIT margin18.9%15.6%-3.3pp
    Discount rate8.9%10.2%+1.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.